UK private equity house Duke Street Capital (DSC) has finally completed the acquisition of Galaxie, the European budget hotel operator based in Brest, France.
Galaxie has long been a target for DSC, which was first linked with the business at the beginning of 2003. In February, it was reported that Duke Street made a E200m offer for the business and today’s final agreement has been reached at that price.
Galaxie has undergone significant expansion since it was founded in 1990 and is now the third largest budget hotel chain in France. It currently owns and operates 100 hotels throughout France and eight in Germany with a combined total of 7,260 rooms. The business has reported steady growth over the last three years. Increasing turnover year-on-year since 2001 by 19.2 per cent. The business made a profit of E7.5m on sales of E75m in the year to June.
The budget sub-sector of the hotel industry has been the most resilient in France over the last few years and both occupancy rates and revenues have proven resistant to economic pressures. Duke Street said in a statement that the relative fragmentation of the budget hotel market in Europe “provides an opportunity for Groupe Galaxie to create a platform for the development of a European market leader, in line with Duke Street Capital’s strategy to create the number one or two player in any industry sector.”
“Groupe Galaxie is one of the leading budget hotel chains in France and is well positioned to benefit from future growth in this segment of the market,” said Frédéric Chauffier, managing director of Duke Street Capital, in the statement. “With hotels in both France and Germany, the business provides an excellent platform for expansion and further reinforces Duke Street Capital’s presence in the leisure sector and in France.”
As part of the change of control, founder Francois Branellec and the original institutional investors, including Crédit Mutuel, will be disposing of their entire stake in the business.
Bank of Scotland is the lead-arranger and underwriter of the debt facilities for the acquisition.